The late enrollment penalty is an amount that’s permanently added to your Medicare drug coverage (Part D) premium. You may owe a late enrollment penalty if at any time after your Initial Enrollment Period is over, there’s a period of 63 or more days in a row when you don’t have Medicare drug coverage or other creditable prescription drug coverage. You’ll generally have to pay the penalty for as long as you have Medicare drug coverage.
Note: If you get Extra Help, you don’t pay a late enrollment penalty.
3 ways to avoid paying a penalty:
1. Enroll in Medicare drug coverage (Part D) when you’re first eligible. Even if you don’t take drugs now, you should consider joining a separate Medicare drug plan or a Medicare Advantage Plan with drug coverage to avoid a penalty. You may be able to find a plan that meets your needs with little to no monthly premiums.
2. Enroll in Medicare drug coverage (Part D) if you lose other creditable coverage. Creditable prescription drug coverage could include drug coverage from a current or former employer or union, TRICARE, Indian Health Service, the Department of Veterans Affairs, or individual health insurance coverage. Your plan must tell you each year if your non-Medicare drug coverage is creditable coverage. If you go 63 days or more in a row without Medicare drug coverage or other creditable prescription drug coverage, you may have to pay a penalty if you sign up for Medicare drug coverage later.
3. Keep records showing when you had other creditable drug coverage, and tell your plan when they ask about it. If you don’t tell your Medicare plan about your previous creditable prescription drug coverage, you may have to pay a penalty for as long as you have Medicare drug coverage.
How much more will I pay for a late enrollment penalty?
The cost of the late enrollment penalty depends on how long you didn’t have creditable prescription drug coverage. Currently, the late enrollment penalty is calculated by multiplying 1% of the “national base beneficiary premium” ($33.06 in 2021) by the number of full, uncovered months that you were eligible but didn’t enroll in Medicare drug coverage (Part D) and went without other creditable prescription drug coverage. The final amount is rounded to the nearest $.10 and added to your monthly premium. Since the “national base beneficiary premium” may increase each year, the penalty amount may also increase each year. After you enroll in Medicare drug coverage, the plan will tell you if you owe a penalty and what your premium will be.
Example: Mrs. Martinez is currently eligible for Medicare, and her Initial Enrollment Period ended on May 31, 2017. She doesn’t have prescription drug coverage from any other source. She didn’t join by May 31, 2017, and instead joined during the Open Enrollment Period that ended December 7, 2019. Her drug coverage was effective January 1, 2020.
Since Mrs. Martinez was without creditable prescription drug coverage from June 2017–December 2019, her penalty in 2020 was 31% (1% for each of the 31 months) of $32.74 (the national base beneficiary premium for 2020) or $10.15.
Since the monthly penalty is always rounded to the nearest $0.10, she paid $10.20 each month in addition to her plan’s monthly premium.
Here’s the math: .31 (31% penalty) × $32.74 (2020 base beneficiary premium) = $10.15
$10.15 rounded to the nearest $0.10 = $10.20
$10.20 = Mrs. Martinez’s monthly late enrollment penalty for 2020.
In 2021, Medicare recalculated Mrs. Martinez’s penalty using the 2021 base beneficiary premium ($33.06). So, Mrs. Martinez’s new monthly penalty in 2021 is 31% of $33.06, or $10.25 each month.
Since the monthly penalty is always rounded to the nearest $0.10, she pays $10.30 each month in addition to her plan’s monthly premium.
Here’s the math: .31 (31% penalty) × $33.06 (2021 base beneficiary premium) = $10.25
$10.25 rounded to the nearest $0.10 = $10.30
$10.30 = Mrs. Martinez’s monthly late enrollment penalty for 2021.
What if I don’t agree with the late enrollment penalty?
Your Medicare drug plan or Medicare Advantage Plan with drug coverage will send you a letter stating you have to pay a late enrollment penalty. If you disagree with your penalty, you can request a review (generally within 60 days from the date on the letter). Fill out the “reconsideration request form” you get with your letter by the date listed in the letter. You can provide proof that supports your case, like information about previous creditable prescription drug coverage. If you need help, call your plan.